Employer of Last Resort for the Czech Republic

Abstract

This article simulates a programme called Employer of Last Resort, and analyses its potential impact in the Czech Republic. The design of the programme guarantees perfectly inelastic demand for labour at a given wage level. In practice, the state would offer a job to anyone willing to work in order to eliminate involuntary unemployment, reduce poverty and income inequality and secure stable growth. My aim is to estimate hypothetical effects on the main objectives and calculate fiscal demands if the programme was launched on the Czech labour market. The results suggest that the programme could significantly reduce unemployment and decrease income inequality. On the other hand, it would have limited impact on income poverty. The gross wage costs of implementing the Employer of Last Resort programme in the Czech Republic are in all constructed scenarios below 1% of the gross domestic product and further calculations suggest that the total net costs could even be negative.